Europe for cities

The European summer has been dominated by the Greek debt crisis. The headlines and news reports of urgent, tension-filled meetings of leaders from the European Commission, the European Central Bank, and national governments have only served to reinforce the common belief that power in Europe is now highly concentrated and centralized.

Yet a recent OECD publication, “Local Economic Leadership,” reminds us that the European experiment is as much sub-national as supra-national, subject to decentralizing as well as centralizing dynamics. The report captures the remarkable efforts underway in Amsterdam, Hamburg, Manchester, and Stockholm—by networks of public, private, and civic leaders—to design and deliver key economy shaping investments and initiatives. The study reaffirms a defining trend in the world today: the emergence of cities as not only the driving engines of national economies but the places where innovative problem solving is becoming the norm.

Three kinds of activities stand out.

First, European cities are working collaboratively with their neighboring municipalities to craft economic narratives and strategies at the metropolitan scale—the organizing unit of the global economy. As an earlier OECD Report found, Europe’s metropolitan areas are dotted with hundreds and hundreds of small localities, each vested with certain powers and responsibilities. This intense localism may have made sense in prior centuries, but today it significantly undermines the ability to compete globally and coordinate on cross-jurisdictional matters such as transportation, the environment, and the economy.

Europe is seeing a wave of voluntary efforts—and even some formal structural reforms—to counter this fragmentation and align with metropolitan geography. In Manchester, for example, all 10 separate local authorities banded together in 2011 to form the Greater Manchester Combined Authority and bring a unified voice to issues and investments that affect their shared economy. In Stockholm, 53 municipalities participate in the Stockholm Business Alliance to create a common vehicle for branding and a one-stop-shop for investors, companies, and entrepreneurs. The Hamburg Metropolitan Region is similarly a voluntary association of administrative districts and cities in the bordering states of Schleswig-Holstein, Mecklenburg-Vorpommern, Lower Saxony, and Hamburg.

Second, European cities are taking on more powers and responsibilities, often in formal agreement with their national governments. National leaders are increasingly recognizing that problem solving close to the ground is often more effective, efficient, and democratic than policymaking in a remote national capital (let alone at the European Union). As one of Germany’s three city states, Hamburg wields significant constitutional powers and is able to affect federal legislation both through its representation in the Bundesrat and Germany’s unique form of cooperative federalism. Manchester has become the test case for greater devolution in Britain, one of the most centralized states in the world. In March 2012, the Greater Manchester Combined Authority successfully negotiated a “city deal” with Whitehall that allowed for Manchester to earn back a portion of its tax revenue to create a revolving infrastructure fund, establish an investment framework to guide economic development, build a city apprenticeship and skills hub, and form a housing investment fund, among other initiatives. A subsequent agreement in November 2014 devolved greater policymaking and funding powers.

The Manchester Devolution Agreement shows a new level of assertiveness on the part of cities in Britain. As Sir Howard Bernstein, the chief executive of Manchester, writes in the foreword to the more recent OECD Report, “We have consistently promoted reforms that gave the city’s elected leaders more flexibility in how they generate and deploy resources, how they deliver high quality public services, and how they collaborate to achieve a scale of assets and opportunities that help us to compete in international markets.”

Finally, European cities are acting in ways that mobilize private and civic engagement and investment and, as Jon Pierre recently wrote for LSE Cities, to “rethink the roles and interactions of local government, local NGOs, and the market.” Unlike national governments—which often operate through extensive partisan and political combat—cities are networks of public, private, and civic institutions and leaders that increasingly work together to solve problems and seize opportunities. In 2010, for example, an Amsterdam Economic Board was established with representation from industry, universities, and local government. The ambitious goal: to “develop the Amsterdam metropolitan area into one of the leading global business hubs in Europe and to position itself as an intercontinental hub of commerce, people, and information.” The method: foster collaboration across the “triple helix” of businesses, knowledge institutes, and government to drive growth in Amsterdam’s distinctive sectors.

Unlike national governments—which generally make arms-length investments in urban development—cities actually make markets by creating new intermediaries, procuring services, or making smart decisions about land use and zoning. Hamburg is effectively expanding its city center by 40 percent through the redevelopment of HafenCity, a site formerly used for shipping and industry. Significantly, the redevelopment is being led by HafenCity Hamburg GmbH, a publicly owned urban development agency that has successfully guided and financed the transformation through the smart combination of public interests and private capacity.

The four cities selected by the OECD are exemplary but not exceptional. Other cities are also doing extraordinary things which are the subject of global study, replication, and adaptation. Barcelona has sparked a global trend by creating an innovation district that strengthens the links between anchor institutions, entrepreneurs, and business incubators. Copenhagen has used a public company (BY&HAVN) and strategic zoning decisions and land transfers to finance the bulk of its Metro system. Sheffield has made advanced manufacturing a priority again and the University of Sheffield has emerged as an innovative center of applied research, corporate/university collaboration, and apprenticeship training.

The recent OECD report shows a more complex and multi-dimensional picture of Europe than commonly understood. It is a timely reminder of Europe’s inherent urban assets and long, proud urban legacy. Before there were nations in Europe, there were powerful city states like Venice that became centers of cultural and economic exchange. Before there were unions of nations, there were networks of cities like the Hanseatic League that powered the evolution of Northern Europe through intricate trading relationships. Unleashing the power of its cities and amplifying the smart urban leadership already on display may be one of the most important structural reforms for the new Europe.